Understanding the Bitcoin for Binary Options Trading

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Bitcoin Trading and Brokers

Buying or trading bitcoins has quickly become one of the most popular and potentially profitable investing methods. The value of bitcoin in relation to other currencies (typically USD) varies wildly almost from minute to minute, making it very interesting from a binary options point-of-view. Buying actual currency or using CFDs on longer time spans should also be considered highly interesting options.

There are now also brokers that accept bitcoin, and other cryptocurrencies, as deposit methods. So traders can fund their account, and be paid out, in Bitcoin or Ethereum etc. Find Out More

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BTC/USD Chart

Basics

Bitcoins are a worldwide phenomena and a growing interest in binary options. The digital currency has a wickedly volatile exchange rate making it perfect for binary trading of all expiries. The popularity, and notoriety, of the currency also makes it a prime target of potential scams and the like, so be aware and only trade with trusted brokers such as the ones we list here on binaryoptions.net.

To begin trading Bitcoin binary options you should have at least a marginal understanding of what they are. Basically, Bitcoins are digitally created currency units that can be spent anywhere Bitcoins are accepted. They are meant to be a free and easy system for international trade that is not reliant on central banks or charges outrageous fees. The coins are based on a very complex cryptographic algorithm that produces value in a process referred to as “mining”. Miners, usually tech savvy computer operators, create the coins by running the program, which strictly limits the number and pace of coins that are “mined” ensuring they are not devalued. As coins are mined they become available for sale, trade or exchange. Bitcoins are now used to exchange currencies around the world and for international trade but have yet to be embraced by the world powers.

A few years ago, the number of brokers offering Bitcoin as an asset to trade was very low. Now, the opposite is true. Several brokers now offer trading on Bitcoin and also some of the lesser-known crypto currencies such as Ethereum or LiteCoin. So traders now have a range of choices when it comes to finding a broker that offers cryptocurrency trading. If your current broker does not offer it, consider moving.

Bitcoin Wallet

To buy and sell bitcoin (rather than simply speculate on the price), you need a cryptocurrency ‘wallet’. This is where security and transparency are crucial – these wallets hold your virtual currency, so you are absolutely reliant on them. We recommend a service called Hodly, which sets high levels of security and has the backing of major finances to ensure their robustness:

How Bitcoin Trading Works

Sensing a new opportunity with Bitcoin and binary options, some innovative brokers have come up with ways to trade binary options and Bitcoin together. There are essentially 2 ways to trade Bitcoin binary options. The first method is by using Bitcoin as a medium of Exchange. The second method is by using Bitcoin as an underlying asset.

Bitcoin as a Medium of Exchange

When it comes to using Bitcoin as a medium of exchange, traders will be trading the various underlying assets in financial markets with Bitcoin. For example, they may be trading the EUR/USD currency pair and call upon a rise or fall upon the expiry of the binary option. So if their trade is successful, they will be paid in Bitcoin instead of fiat currencies like the U.S dollar or Euro.

You might be wondering why anyone would just want to accept Bitcoin when getting paid in U.S dollar as always been fine before. The first benefit of transacting in Bitcoin is the fact that the cost of transaction is the lowest among all forms of online payment. This is the very reason why Bitcoin was created in the first place, to lower the cost of online transaction. Since there is no central authority managing Bitcoin, no service fee is paid when receiving or transmitting payment.

Bitcoin Trading

Another key reason for traders to use Bitcoin in Binary options trading is to earn extra Bitcoin. Bitcoin by itself is traded and its value to the U.S dollar varies according to the demand for it. By having all the trading transactions denoted in Bitcoin, a trader is able to shield himself from the fluctuation of this crypto currency while at the same time earn more of it through profits earned in trading.

Nevertheless, it should be noted that this form of trading is however confined to binary brokers who will accept Bitcoin as a medium of exchange. In other words, there are only a limited number of binary options brokers which fall into this category.

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Bitcoin as an Underlying Asset

Another method of trading Bitcoin with binary options is to regard Bitcoin as an underlying asset. As mentioned earlier, Bitcoin itself is traded on specialized Bitcoin Exchanges. Its exchange rate in relation to the U.S dollar rises and falls in accordance to the demand for it.

For example, during the Cyprus banking crisis in 2020, loss of confidence in Euro led to investors switching their safe haven of wealth from the Euro to Bitcoin. This sudden surge in demand for Bitcoin helped to push its value up to almost on par with the value of gold prices. Because of this volatility, some binary brokers began introducing binary options contracts which tied to the value of Bitcoin. In other words, Bitcoin is traded just like any underlying assets that we find listed on most binary brokers’ platforms.

Deposit And Trade Using Cryptocurrency

Some brokers will now accept bitcoin as an account funding method. This allows traders to deposit, trade with, and be paid out in Bitcoin. The leading broker offering such a service is BinaryCent. They will accept 15 different cryptocurrencies as deposit methods, including Bitcoin, Ethereum and DASH.

Binary Options with Bitcoin

One of the true currency success stories of our time, Bitcoin is quite a phenomenon. At the time of writing, Bitcoin is at its highest ever value at $1280, that means one Bitcoin is worth $1280 – and it doesn’t show any signs of slowing down. Bitcoin is what’s known as a crypto currency or a virtual currency. It’s not tangible and many people still don’t understand how it works due its virtual nature. The story of Bitcoin is one of a covert nature – no one actually knows who created Bitcoin, although we do know that it was created by a programmer in 2008. It was established as a peer-to-peer payment method or currency, meaning it is bought and sold between individuals and it works over an open source sharing system that is similar to BitTorrent. There’s no bank that creates Bitcoin and there’s no exchange or intermediary that controls or manages it. Wherever there is a success story, there is of course a dark side too. That’s no different to the criminals this payment method has attracted, who try to steal Bitcoin using technology and cyber hacking.

Best Binary Brokers with Bitcoin

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As well as being awarded in exchange for what’s called mining – that means using your computer’s power to monitor Bitcoin transactions, it can also be used as a payment method – for buying, selling and exchanging as a currency type. Currently there are well over 100,000 merchants that accept Bitcoin as a currency and somewhere around 5 million users with a crypto currency wallet, many of which are using Bitcoin.

Bitcoin is now commonly accepted by many Binary brokerage firms, who favour the payment method due its electronic nature and the fact that costs for accepting and using Bitcoin are much lower than accepting or paying with credit card or bank transfer. Other benefits of using Bitcoin include no credit card or chargeback fraud as there is no card number to steal. Also Bitcoin is not subject to inflation so there’s no risk that while holding Bitcoin interest rates that rise or fall will affect the price.

Additionally many brokers now allow the trading of Bitcoin on their platforms. So with binary options trading that means you will need to predict whether the price of Bitcoin will go up or down by the expiry time. It works in the same way as trading other assets such as stocks like Facebook or currency pairs like the EUR/USD.

Binary brokers who have been known for accepting Bitcoin are Finpari, Binary Mate and Exbino.

How to Deposit with Bitcoin

There are various apps you can use in order to buy Bitcoin and to then use it as a currency. One example is an iPhone app called CoinBase. Using this app is simple. First, of course you will need to download it to your smartphone. Once you have done this you will need to open an account by entering all your personal information and completing the 2-step verification process. Once you have done that you will need to decide how you wish to buy the Bitcoin. Here you can use either your bank account or your credit/debit card to make payment. The banking route takes 4 to 5 days to process whereas using your debit or credit card is almost instant.

Bitcoin and Binary Options: Everything You Need to Know

An Intro to Crytocurrencies

Anyone who hasn’t spent the past few years cut off from the modern world will have heard of the rise of cryptocurrencies and Bitcoin in particular.

Positioned as an alternative to traditional central bank and government controlled national currencies such as the U.S. dollar, euro, pound or yen, cryptocurrencies are based on a de-centralised digital system. In theory at least, cryptocurrencies are completely independent, their value based on pure supply and demand and cannot be manipulated by third-parties with a vested interest. The underlying technology that cryptocurrencies are built upon is called blockchain which, very simply put, means every holder of the currency carries a complete history of every transaction units of the currency have ever been involved in. We’ll give a still very brief but slightly more extended explanation shortly.

Despite initial public skepticism and strong resistance on the part of the financial establishment, Bitcoin and a handful of other cryptocurrency pretenders are starting to break into the mainstream. Huge amounts of investment have been poured in blockchain technology and cryptocurrencies; more than had been invested in the internet at a similar stage of its development. Every big bank and financial institution in the world is now investing in blockchain technology and readying themselves for the likely future role that cryptocurrencies will play in the financial industry.

It’s not yet sure which cryptocurrency, or cryptocurrencies, will eventually be those we use, or if there will be another twist in the tale that changes current forecasts on their impending mainstream adoption. However, the smart money is certainly on blockchain-based cryptocurrencies becoming part of our daily lives, probably within the next decade. And at least for now, Bitcoin, the first cryptocurrency to be widely used, is out in front, though the race is hotting up with challengers such as Ethereum gaining traction.

Bitcoin now has a free-floating exchange rate with the U.S. dollar and other major world currencies. As a result, several big online brokers both of CFDs and binary options now offer a market on it. Bitcoin’s relative infancy means that its exchange rate has been extremely volatile over the period since its launch in 2009. This volatility has made it an attractive market for traders looking to take advantage of large swings in its value. Before we look at Bitcoin specifically as a market for binary options traders, let’s back up a little and try to concisely explain how blockchain technology and Bitcoin as a currency work.

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A Concise Explanation of How Bitcoin and Blockchain Work

The first thing to understand about Bitcoin is that unlike with fiat currency, digital transactions don’t require a middle man. If you want to give a friend £10 you can simply hand them a £10 note. If you want to transfer the same person £10 you at the very least need your bank, or e-wallet provider, and theirs, to facilitate the exchange. Bitcoin’s blockchain technology removes the need for a third party. It’s a pure P2P transaction.

The inherent problem with the transfer of a digital object, as opposed to a physical object, is that of preventing ‘double spending’. If person A hands person B £10, person A no longer has any control of that £10. It’s gone and in the possession of person A. But if it’s digital a 3 rd party has to verify there is only one copy. Digital object need to be tracked. That requires a ledger. But what if the person in charge of the ledger simply creates more digital money? Wouldn’t that reduce the value of the £10 by creating more supply? That’s pretty much the problem many perceive in fiat currencies that cryptocurrencies hope to solve.

But what if everyone had a copy of the ledger that had recorded in it every transaction of digital money that had ever happened and it lived in every computer of everyone that had every exchanged digital money? Then no-one could cheat and make copies of digital money, right? That’s essentially how blockchain and Bitcoin works. No one person controls the record and no one person can make themselves more digital money and no third party is required. With every transaction, the information is updated on every copy of the ledger held on different computers so third-party control is controlled.

Trading Bitcoin via Binary Options

Trading Bitcoin via Binary Options works in exactly the same way as trading any other market. The broker will offer a Bitcoin price chart based upon the exchange rate of Bitcoin to major global currencies as per one or a combination of the most liquid Bitcoin exchanges. While the exchange rates on different exchanges don’t diverge much there can be small discrepancies so it is important to understand where your particular broker’s pricing information is sourced from.

Understand Factors that Influence Bitcoin’s Exchange Rate

As with any financial instrument, having success trading Bitcoin as a binary option means understanding the factors that its price is particularly sensitive to and keeping up-to-date with the news and technical trends. Bitcoin’s character as a cryptocurrency means that the factors that influence its value are slightly different to those of fiat currencies.

Interest rate changes, quantitative easing and inflation rates don’t influence Bitcoin’s value as it is not tied to any one country, economy or central bank. Geopolitical events also don’t have the same influence as they would for a fiat currency.

The only real influence of Bitcoin value is total global demand for the currency. When news of a development that can be interpreted as positive for future Bitcoin adoption, such as a major bank investing in blockchain infrastructure, breaks that can push Bitcoin higher. News of a security breach on an exchange or anything else that will dampen global faith in Bitcoin will lead to a fall. Positive news on a competitor cryptocurrency would also be expected to have a negative influence on price.

Like fiat currencies Bitcoin’s value is sentiment based. The difference is that sentiment is based on global sentiment on whether or not Bitcoin will become a mainstream currency long term rather than the country-specific influences on fiat currencies.

Trading Bitcoin successfully via binary options means educating oneself on the difference in what influences price, how and sourcing a number of reliable real-time news sources such as hodlhodl.com, bravenewcoin.com and bitcoinmagazine.com.

Because Bitcoin sentiment still swings so significantly and so often, trading the cryptocurrency smartly can be one of the most profitable markets available as a binary option for traders who take the time to educate themselves on its specifics. The

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